How Many Billions It Would Cost Apple to Settle With Qualcomm? Here’s an Estimate

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Apple’s legal battle with Qualcomm is likely to be resolved out of court fairly soon, with the iPhone making agreeing to pay $8 billion up front plus ongoing royalties, according to one Wall Street analyst who follows the companies.

“We see merit in both parties’ arguments, and believe mutual self-interest will prevail, making it unlikely that this dispute will result in prolonged litigation or court trials,” Credit Suisse analyst Kulbinder Garcha wrote in a report on the dispute this week. “An amenable settlement for both parties is possible. This would likely result in a major upfront payment and a heavily discounted royalty rate. It would also likely leave open the possibility of these companies collaborating in other areas.”

A settlement would be consistent with comments that Qualcomm CEO Steve Mollenkopf made last month at Fortune’s Brainstorm Tech conference in Aspen. Asked about the Apple dispute, Mollenkopf explained “those things tend to get to resolved out of court and there’s no reason why I wouldn’t expect that to be the case here.”

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Apple sued Qualcomm in January, alleging that its longtime communications chip supplier was exploiting a dominant market position to charge excessive royalties. Apple said it paid Qualcomm a percentage of the value of every iPhone, thus increasing the royalty amounts simply when it sold a model with more memory or a bigger screen.

Qualcomm, which is also facing several similar cases from antitrust regulators around the world, has defended its roylaty strategy as perfectly legal and countersued Apple in April.

The dispute heated up in April when Apple decided to stop making the payments to its iPhone suppliers like Foxconn that were passed on to Qualcomm to cover the royalties due. then last month, Qualcomm asked the U.S. International Trade Commission to bar the import of some iPhones.

Apple aapl could settle the case with Qualcomm qcom by paying $8 billion without any harm to its massive balance sheet, Garcha said. And it could negotiate a lower per-iPhone royalty rate of $5.90, he said.

“Apple could digest a payment given its cash balances and would welcome a minimal hit to its gross margin, while Qualcomm would welcome upfront revenues,” Garcha wrote.

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